Arizona Real Estate License Practice Exam 2025 - Free Real Estate Practice Questions and Study Guide

The term for when Net Operating Income (NOI) is based on hypothetical future estimates to assist in decision-making is known as a proforma statement. A proforma statement provides projections of income and expenses, allowing stakeholders to evaluate potential profitability and cash flow for a property or investment over a specific period. It serves as a key tool in real estate as it helps investors assess the viability of a project or investment based on estimated financial performance rather than existing or historical data.

The proforma format typically includes assumptions about future income, operating expenses, financing costs, and other factors that may impact the property’s financial success. This makes it essential for preparing budgets, evaluating investment opportunities, and securing financing. It offers a forward-looking perspective that aids in strategic planning and investment analysis.

While financial statements provide a snapshot of financial performance based on actual results, a market analysis evaluates the market conditions and factors affecting property values. An operating budget outlines the expected income and expenses of a property for a specific period, focusing on operational aspects rather than hypothetical future estimates.